Farm Policy Expert Discusses Ag Baseline

Friday, January 25, 2013   By Tom Sell, Combest, Sell & Associates

      Much has been written lately about the federal budget baseline for agriculture and the implications of the one-year extension of the farm bill for 2013. Some have lamented a certain reduction in the baseline that they say will make it more difficult to write a new farm bill in 2013. Others have said we will now have to achieve five years of savings in a new four-year farm bill. Passing a new long-term farm bill this year does present very real challenges to be sure, but the budget baseline will not be the problem — if anything it is our friend and not our foe.

      What is the budget baseline?  The ways of Washington can be very confounding, but here is a relatively simple way to consider the baseline. Based on economic models for the next 10 years (expected commodity prices and production trends), what would the law or the programs in place today be expected to spend over that same time period?  That is the baseline.

      For agriculture, the baseline is made up of expected spending on farm programs (largely direct payments because the counter-cyclical program is not expected to pay because projected commodity prices are higher than target prices); conservation programs (CRP, EQIP, CSP, etc.); and crop insurance (expected to be higher because increases in participation and higher commodity prices mean higher premium subsidies). These three baselines (the ten year window in the future), as well as their historical spending looking backwards, are depicted in the attached chart. (see http://www.plainscotton.org/mj/chart1.jpg)

      What will the new baseline be?  The one-year extension of the farm bill passed by Congress on New Year's Day and signed into law as part of the American Taxpayer Relief Act preserved the agriculture baseline in full by extending the farm and conservation programs for a year (crop insurance is a separate act so would not have sunset with the farm bill). As Congress embarks upon writing a new farm bill in 2013 for the 2014 crop year going forward, it will have this same baseline, only shifted 1 year out (a 2014 to 2023 window instead of 2013 to 2022), and adjusted based on new economic projections (this will be done in the Congressional Budget Office's (CBO) March update).

      We got a hint of the potential changes to the economic projection in CBO's August mid-season update, which are reflected in the dashed lines on the chart. But you can see that while they expected a bump in crop insurance costs due to the drought in 2012, it did not impact the 10-year baseline window much at all. 

      What will be the savings target of the new farm bill?  This is the real question going forward. Last year both the U.S. Senate and House crafted bills that would have reduced spending in the farm program, conservation and crop insurance areas by about $19 billion over 10 years (additional savings from nutrition programs made the balance of total savings -- $23 billion in Senate bill and $35 billion in House). These figures are derived by taking the proposed changes in law and measuring them against the same economic models used in calculating the baseline. Therefore, since the new baseline for writing a farm bill in 2013 will be largely the same as the baseline we dealt with last year, one can assume that crafting similar changes to the law would achieve a comparable level of savings.

      Whether the new savings target is the same, higher or lower, Ag leaders will need to be creative in finding the best ways to achieve the savings while improving the safety net to promote confidence in the agriculture economy going forward.

      When will the new targets and new process be set?  As part of the New Year's American Taxpayer Relief Act, Congress also delayed sequester for 2 months such that in March we have the debt ceiling, sequester and CR issues that will have to be addressed. Our expectation out of this is that new spending reduction targets will be set government wide (and this needs to happen considering our $1.3 trillion deficit and $16 trillion national debt).

      Presumably this would include a new target for the Agriculture Committees, and then they will begin their work in earnest to craft the new farm bill for the 2014 crop year in the late spring, early summer months of this year. For this reason, it is important to keep hope and remain involved. The process could actually be improved for agriculture this year, and we have a lot of great leaders in Congress working very hard to make it so, but they need our support.

 

 

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USDA FSA Announces 2013 DCP/ACRE

Program Sign-ups To Begin February 19

Tuesday, January 22, 2013                 From the USDA Farm Service Agency

      The U.S. Department of Agriculture's Farm Service Agency (FSA) reminds producers that the American Taxpayer Relief Act of 2012 extended the authorization of the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill) for many Commodity Credit Corporation (CCC) commodity, disaster, and conservation programs through 2013. FSA administers these programs.

      The extended programs include, among others: the Direct and Counter-Cyclical Payment Program (DCP), the Average Crop Revenue Election Program (ACRE), and the Milk Income Loss Contract Program (MILC). FSA is preparing the following actions:

      FSA will begin sign-ups for DCP and ACRE for the 2013 crops on Feb. 19, 2013. The DCP sign-up period will end Aug. 2, 2013; the ACRE sign-up period will end June 3, 2013.

      The 2013 DCP and ACRE program provisions are unchanged from 2012, except that all eligible participants in 2013 may choose to enroll in either DCP or ACRE for the 2013 crop year. This means that eligible producers who were enrolled in ACRE in 2012 may elect to enroll in DCP in 2013 or may re-enroll in ACRE in 2013 (and vice versa).

      All dairy producers' MILC contracts are automatically extended to Sept. 30, 2013. Eligible producers therefore do not need to re-enroll in MILC. Specific details regarding certain modifications to MILC will be released soon.

      FSA will provide producers with information on program requirements, updates and signups as the information becomes available. Any additional details will be posted on FSA's website, http://www.fsa.usda.gov.

 

Want the facts about the U.S. agriculture and farm policy?
http://www.farmpolicyfacts.org 

 

HAC Chairman Commends USDA Announcement

on 2013 Program Sign-up

Tuesday, January 22, 2013              From the House Ag Committee

      Today, Chairman Frank Lucas released the following statement in response to the U.S. Department of Agriculture's announcement that enrollment for farm programs for the 2013 crop year begins next month.

      "I want to commend Secretary Vilsack for today's announcement that sign-up for farm programs, including direct payments, will begin on February 19th.  It is vitally important that our farmers, and lenders alike, know that Congress and the Administration intend to keep the commitment made with the one-year extension of the 2008 farm bill.  Short of a five-year bill, this extension provides certainty for the 2013 crop year.

"Looking ahead, it is equally important that our farmers and ranchers be able to plan for the long term.  As we renew efforts to complete a five-year comprehensive farm bill, I pledge to work with the Secretary, my House and Senate colleagues, and all interested parties to advance a fiscally responsible, reform-minded, and balanced farm bill this year.  My goal remains, as ever before, to complete our work and ensure our investment in American agriculture."

 

 

Upcoming Area Ag Conferences

      NOTE: A complete list, along with program agendas when made available, can be found on the Plains Cotton Growers website at http://www.plainscotton.org/agconferences.html

      January 28 - iPhone/iPad Training - Texas A&M AgriLife Extension Office - Gaines County Courthouse, 101 S. Main, Room 108, Seminole - Contact Terry Millican, County Extension Agent-AG, 432-758-4006.

      January 28 - iPhone/iPad Training - 1:30-4:30 p.m., Brownfield ISD Administration Building, Brownfield - Contact the Texas A&M AgriLife Extension Office in Terry County, 806-637-4060.

      January 29 - Small Farms Business Seminar, Plainview - Contact Gary Cross, County Extension Agent-AG, 806-291-5267.

      January 29 - Cotton Variety and Economics Workshop, Farwell Community Center - Contact Benji Henderson, County Extension Agent-AG, 806-481-3619.

      January 30 - Alternative Crops Meeting, Post - Contact Greg Jones, County Extension Agent-AG, 806-495-4400.

      February 5 - "Other Than Cotton" Meeting, Lamesa - Contact Gary Roschetzky, County Extension Agent-AG, 806-872-3444.

      February 6 - Grain Sorghum Workshop, Texas A&M AgriLife Research & Extension Center, Lubbock - Contact the Texas A&M AgriLife Extension office in Lubbock County, 806-775-1680.

      February 7 - Potter County Grain Sorghum Conference - Contact Brandon Boughen, 806-373-0713.

      February 11 - Hale/Swisher Crop Conference, Ollie Liner Center, Plainview - Contact Gary Cross, County Extension Agent-AG, for more information at 806-291-5267.

      February 12 - Feed Grains Conference, Muleshoe - Contact Curtis Preston, County Extension Agent-AG, for more information at 806-272-4584.

      February 13 - Ag Appreciation Day, Rita Blanca Coliseum, Dalhart - Contact Mike Bragg, County Extension Agent-AG, for more information at 806-244-4434.

      If you have another conference to add to this list, or if you have an agenda you'd like to link, please call PCG at (806) 792-4904 and ask for Mary Jane Buerkle, or email maryjane@plainscotton.org. All spring conferences are listed at http://www.plainscotton.org/agconferences.html.